The law on real estate activity and what realtors themselves think about it

In the discussion of the draft law, which may be submitted to the State Duma this fall, the phrases “countering fraud”, “combating unfair competition”, “certification centers” and “liability insurance options” are most often heard

In continuation of the conversation about the next law on real estate activity being prepared today, the first thing to note is: the vast majority of professional, namely professional realtors have always been in favor of regulating the industry — here Svetlana Razvorotneva, deputy chairman of the State Duma Committee on Construction and Housing and Communal Services, is absolutely right.

Those who have been on the market for a long time remember the licensing times, however, Konstantin Barsukov, CEO of the Relight-Real Estate agency, and many of his colleagues call such regulation too harsh. And when someone there issues or does not issue licenses at their own discretion, everyone understands what scope there is for various combinations with a complete lack of responsibility for the quality of services that the license holder provides to his clients. Anyway, the resolution “On approval of the regulations on licensing real estate activities” adopted in 1996 was canceled in 2002.

Today, realtors are controlled mainly by the second part of the Civil Code, and this is certainly not enough. Taking advantage of the legal vacuum, the industry began to come… yes, anyone began to come! In fact, now anyone can call themselves a realtor, engage in real estate activities (and not necessarily do it badly, on the contrary — maybe very well), but such a situation not only opens the way to fraud of all stripes, but also generates unfair competition, which is actively opposed by professionals.

“In fact, the state imposes quite a lot of requirements on realtors to submit various types of reports: This includes statistical reporting, and most importantly, reporting in the field of countering the laundering of illegally obtained income, the legalization of these incomes and the financing of terrorism. And it turns out that some organizations and realtors, registered as individual entrepreneurs, submit these reports and comply with the requirements of the law, and there are a lot of specialists who do not conclude contracts for the provision of services. They do not pay taxes, do not file any reports, and not only do they not comply with the requirements of the state, they also create the basis for unfair competition. Because a legal company spends certain resources on maintaining the infrastructure necessary for professional activities, including paying taxes, while someone does not spend and, accordingly, has an advantage in terms of pricing. We are not talking about the fact that the adoption of the law will necessarily increase the cost of real estate work — no, competition will be like that, and companies and agents can provide services at different prices. The question here is different: it’s one thing when the price is justified by quality, service component and other things — that is, fair competition, and it’s quite another thing when it’s like this,” explains Konstantin Barsukov.

The expert considers the appearance of state publicly available registers of bona fide and unscrupulous realtors to be the right idea and notes that the openness of these lists will also create additional “civil control”. At the same time, he suggests paying special attention to the certification system, if and when it is introduced.

Konstantin Barsukov, General Director of the Relight-Real Estate agency, “The structure that will officially deal with training, and most importantly, certification, without which it will be impossible to get into the register, should not be the only one — otherwise it will be no different from licensing and will again force the market to slide into the “gray zone”. That is, it should be possible to create various certification bodies. It is clear that all of them will have to comply with certain requirements (these requirements, in principle, are very banal, and they can be clearly spelled out), but a kind of competition should appear among them. Perhaps educational institutions could take over some of this work. For example, I worked as a visiting lecturer at Plekhanovsky, and the issue of training realtors at the university was raised there. So, if high-level training centers appear, then why not give them the opportunity to issue certificates? Of course, certification standards and criteria must be established in parallel, and they should not be so strict that only one or two organizations can meet them.”

In a conversation with Business FM, the expert raised several more topics that it makes sense to discuss outside of this material. For example, he is sure that the introduction of a mandatory patent for real estate activity will be a smart move. And also that “it is necessary to adopt at the federal level a rule according to which an advertisement for the sale of real estate can be placed either by its owner, or a person acting under a power of attorney from the owner, or a certified realtor listed in the state register and no one else — then we would have brought a lot of people out of the gray zone.”

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As for the law under discussion, Konstantin Barsukov proposes to add a provision on arbitration courts to its text.

“Now any court proceedings are lengthy, and very often disputes arise within the framework of real estate activities for insignificant amounts, for 30, 50, 100 thousand rubles. These are mainly the amounts of advances. And so, to be honest, I would assign the functions of arbitration courts to handle such cases at the first stages, so that a person would have no special costs (both time and financial) he could quickly get a decision on the issue of the prepayment, if there was some conflict or he simply changed his mind about buying. When it comes to 30 or 50 thousand, it is clear that few people will go to court and sue for six months for such a sum. But there would be an arbitration court — and people would be happy to go, apply, get a decision, and that’s it.”

“The adoption of the law on real estate activity is a complex process that requires the coordination of different points of view. However, such a regulatory act can become an important milestone in the development of the real estate market and respect for the interests of its participants. In particular, it can provide a higher level of protection of the rights of buyers and sellers of real estate, reduce the number of scams, and improve the quality of services through their standardization. In addition, the law will lead to the leaching of unskilled personnel from the market,” Ruslan Syrtsov, Managing Director of Metrium, continues the discussion.

From his point of view, the idea of forming public registries has the potential to improve the market situation. “But it is important that clear and transparent criteria be developed to exclude the possibility of abuse and manipulation. If these conditions are met, the registries will allow potential clients to obtain information about the reputation of specialists and make an informed decision about cooperation. At the same time, the position of realtors in the database should not be settled once and for all. In particular, organizations from the “black list” should have the right to rehabilitation in the event of an improvement in the quality of services provided,” the expert believes.

Should only legal entities be engaged in real estate activity?

“On the one hand, such a decision can contribute to increasing professionalism and responsibility in the market, since legal entities usually have stricter requirements for the qualifications of employees and the quality of services provided. In addition, this will allow for better control of the activities of realtors and prevent possible abuses. However, on the other hand, such a restriction can lead to monopolization of the market by large real estate agencies and reduce competition, which, in turn, can negatively affect the quality of services and prices for consumers. It can also create additional difficulties for individual entrepreneurs and the self—employed, who are also engaged in real estate activities,” Ruslan Syrtsov thinks.

And he adds that “professional liability insurance for realtors can become an additional tool for protecting consumer rights and increasing confidence in the profession. But it is important to determine exactly which risks should be insured in order to ensure effective protection of the interests of all parties to the transaction.”

Ruslan Syrtsov, Managing Director of Metrium, “Possible options for insurance are, first of all, mistakes in paperwork. These may be errors in purchase and sale agreements, leases or other documents that can lead to legal problems for the client. The next point is damage to the client’s property. For example, if the realtor did not warn the client about possible problems with the condition of the property, this may lead to damage to the property. Finally, fraud on the part of the realtor: if the realtor is found guilty of fraud or dishonest behavior, insurance can cover the client’s losses. However, it is important to take into account that insurance can affect the cost of realtors’ services and, as a result, the availability of their services to customers. It is also necessary to develop clear criteria for insurance claims and compensation payment mechanisms in order to avoid possible abuse by customers or insurers.”

Summing up, Ruslan Syrtsov notes that, in general, the law on real estate activity should regulate the following aspects:

• Requirements for realtors. The law should establish requirements for the qualifications, work experience and professional training of realtors. This will help to ensure a high level of professionalism and responsibility in the real estate market.
• Standards of service provision. The law should prescribe standards for the provision of real estate services, such as ethical standards, responsibility for mistakes and respect for the confidentiality of customer information.
• Control and supervision. The law should provide for mechanisms for monitoring and supervision of the activities of realtors by the state or self-regulatory organizations.
• Liability insurance. The law may introduce compulsory insurance of professional liability of realtors to protect consumer rights and increase confidence in the profession.
• Public registries. The law may provide for the creation of public registers of realtors that meet certain requirements, and at the same time registers of unscrupulous realtors.
• Responsibility for violations. The law should determine responsibility for violation of the requirements and standards for the provision of real estate services.
• Interaction with other market participants. The law should take into account the interaction of realtors with other market participants, such as banks, notaries and registration authorities.
• Consumer protection. The law should ensure the protection of the rights and interests of clients of realtors, prevent fraud and unfair behavior.

In principle, all this is present in the bill. But maybe developers working closely with realtors have their own additions and comments? This is discussed in the final part of the material.

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